This is contributing to record
income inequality and starving the primary engine of
U.S. economic growth — the vast American middle class — of
purchasing power.

If average Americans don't get paid living wages, they
can't can't buy products and services. And when average Americans
can't buy products and services, the companies that sell them
can't grow. So the profit obsession of America's big companies
is, ironically, hurting their ability to
grow.

One reason American companies are treating their employees as
"costs"--and seeking to minimize them--is that this is exactly
what Wall Street insists that they do.

As more of the economy's wealth has gone to investors, more of
the country's smartest and most ambitious executives have
followed the easy money to Wall Street. And these folks have done
an extraordinary job of capturing a record share of the country's
income and wealth for themselves.

To make America's economy healthy again, we're going to have to
persuade (or force) Wall Street and corporate America to share
more of their wealth with the folks who create it--the hundred
million or so Americans who work as average employees.

Because the "trickle-down" philosophy and power structure that
has led to a record share of America's income going to the owners
(a.k.a., "capital") has been decades in the
making. And it's likely
going to take decades to reverse.

As evidence of this, I recently got the note below from a former
state public official. He offered some examples of how entrenched
our shareholder value religion has become:

Your recent series on profits and pay has hit the nail on the
head, and as a citizen I deeply appreciate you publishing and
pressing on them. All of your points about capital winning over
labor, the exaltation of short-term profits over long-term
profitability and growth, and the view of labor as a cost that
must always be minimized, challenge assumptions that Wall Street
has baked into the "conventional wisdom" to its (and only its)
advantage. From a macroeconomic standpoint, there are great
arguments in favor of spreading more of a corporation's profits
to employees. So please keep making them.

For what it's worth, I offer two additional sets of observations.
In my current role, I can't opine on these kinds of things
publicly, so please don't identify me:

1. This mindset of profit maximization uber
alles is baked directly into American corporate law, in a
way that makes it very hard for boards (especially of publicly
traded companies) to measure success with anything other than
returns to investors.

Imagine the quarterly earnings call for a company that misses the
Street's expectations -- or, God forbid, lowered its dividend --
because it decided to increase wages. Within nanoseconds, there
would be calls for management's heads and complaints about
inefficiency or a failure to stay competitive. And unless (and
until) the company could demonstrate a tangible ROI from that
decision -- higher sales/profits from happier, more productive
employees, from a more robust local economy -- it would take an
enormous risk pursuing such a strategy. Success would be hard to
prove, especially for the company that might try this first or
early, because competitors would have an incentive to keep their
employee "costs" lower and take economic advantage of the
difference. Under the current Street-oriented thinking, the only
companies who will raise wages are those in a space where there's
a shortage of skilled labor and a risk that they won't be able to
compete if they lose people. And that leaves out a LOT of people
and job functions.

The problem of the governing law manifests itself most tangibly
in the M&A context. A public company that makes itself
"uncompetitive" by increasing wages risks being taken over by a
private equity firm that sees an opportunity to run the company
more efficiently. And the law strongly favors the takeover
because the only question a court would consider if the Board
declined it would be the relative return to shareholders -- a
long-term view of what's good for the company or the economy
would lose to investors who want a premium return now. Always. So
it's not enough to ask the question and re-frame our thinking --
the rules of the game are rigged to the advantage of the
capital/investor class, and boards buck their thinking to their
(and their companies') serious potential detriment.

2. This notion of investor expectations has other
insidious tentacles. In my former public life, I saw investor
expectations increasingly driving companies' strategies in two
overt ways.

First, despite the fact that regulated utilties are about the
lowest-risk businesses in America, the companies routinely sought
returns on equity of 10.5-11.75%, citing investors' expectations.
Never mind the historically low interest rate environment and the
dramatically lower cost of borrowing -- the companies brought in
experts who opined that investors would leave these companies in
droves without returns in that range. In one case, an expert
argued that the low interest rate environment REQUIRED the state
to increase the utilty's return because the returns in risk-free
investments like insured bank deposits and Treasuries were so low
-- in other words, someone had to provide an opportunity for
investors to make a lot of money for little to no risk, and so it
was incumbent on the state to raise electric and gas rates by a
lot. Everyone just assumed that if we reached a decision that
Wall Street deemed "unconstructive" or "negative," the utilities'
credit would tighten and life would be bad, but they offered no
actual evidence of this, and indeed when other factors (like the
2008 meltdown) tightened credit, they took the utilities down
with everyone else. The argument was classic trickle-down -- take
care of investors first and then good things might happen (but
might not if other factors intecede). Any state that resisted
these arguments was considered a hostile regulatory environment
by the investor community, even with approved returns above 9.5%
for nearly every one of these companies. Regulators in many
states have sided with the industry, and investors have made a
ton of money with virtually no risk.

Second, more and more of the utility sector is controlled by
large, publicly traded holding companies that view that business
in Wall Street terms. So companies that began as local, monopoly
service businesses accountable to their customers are now huge
national and international companies for which which the
regulated local company is expected to deliver cash and earnings
to support the now-unregulated businesses in the bigger corporate
family. This has happened because the financial community saw an
opportunity in the 90s, got Congress to repeal the Public Utility
Holding Company Act, then lobbied state legislatures to
"restructure." Enron was a HUGE player in that movement, by the
way. But much as you've observed with regard to employees being
seen as "costs," the utility sector views customers entirely in
terms of revenue and returns.

In other words, Americans, get used to your lives as serfs. The
day when America's companies once again share their wealth with
all three of their constituencies--customers, shareholders,
and employees--appears to be a long way off.